How not to make a case for liberalism — Wealth tax in the French elections

French presidential candidate Emmanuel Macron promised to attack all rent seeking behaviours. Once such rent he identified is the real estate rent and in the wake of Thomas Piketty, he suggested that such rents should be taxed. To do so, he wishes to reorient the French wealth tax.

France is one of the many countries with a wealth tax, that is a tax on assets, real estate and securities alike. Yet the wealth tax is obviously unfair, as it has been shown repeatedly: the several French billionaires pay little tax, and France’s richest woman (who happens to be the world’s richest woman) pays a whooping naught of wealth tax. Zero euro.

She is, like many others, the beneficiary of an enjoyable loophole whereby the combination of wealth and revenue taxes are capped at 75% of one’s revenue. That looks fair enough! But that is not enough for lever tax lawyers, who quickly arrange for rich heiresses and other wealthy corporate figures to have little to no revenues (as understood by tax law.) A lot of stashed wealth, maybe, but no revenues. What is 75% of 0? Well, 0. So how much wealth tax do they pay, then? 0.

One could then expect Macron (and certainly, I did) to target wealth tax on this basis. As a liberal, he could decide to remove it, as it is obviously inefficient. Or change it, change the cap, but do something about it. His program contains one provision on the wealth tax: he promises to change it so that it applies only to real estate and not moveable assets, like shares. His rationale is that many start-up and SMEs owners are “forced” to sell their their business once it becomes successful, by fear of having to pay the wealth tax based on the shares they own.

That might be very true, and if it is the case, most unfortunate. Yet is that the main issue with the wealth tax? This look like an extremely targeted measure, which might make the wealth tax less unfair, but only marginally so. Why not discuss it more fundamentally? Why not assess the outcomes of the wealth tax with regards to its aims? Why add yet another niche to a tax system which has avowedly too many already?

Many attack Macron on his past as an investment banker. Many are cynical of his attempts at flipping the table: how can a “pure product” of the French elites manufacturing system actually flip the table? The entre-deux-tours, that is the period between the first and second turn of the presidential election, is marked with hesitation, both left and right, towards the liberal candidate. In a country where liberalism has never had good press, is it with such measures that he will convince that liberalism can do good? That it is not just another one of these gimmicks that only make the rich richer and the poor poorer? What kind of message is he sending to working class women and men, farmers and jobless students? That their startuppy fellow citizens will get a tax break that will hopefully keep their hopes of reaching the Bettencourt, Bezos and Ambani of this world high enough.

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